$4 billion worth of XLM burned
On Nov. 4th, the Stellar Development Foundation (SDF) shook the entire crypto community by announcing the decision to burn 55 billion Lumens, equivalent to over $4 billion. Out of that amount, 50 billion tokens were taken from the 68 billion XLM that the Foundation held as part of a fund dedicated to fostering the adoption of this cryptocurrency. The other 5 billion were part of SDF’s operation fund. The announcement read:
“This reduction isn’t in any way a retreat from our mission. It’s an acknowledgment that we owe it to the ecosystem, to the network, and to ourselves, to be as efficient as possible in our work.”
The tokens were sent to a Stellar account with “no signers,” which made it possible to discard them permanently. Despite this massive number of Lumens being burned, SDF is confident that the remaining funds will be enough to influence the growth of the network. Now, 12 billion XLM is left for the Foundation’s operations, 6 billion for giveaways, and 12 billion for partnerships.
The significant supply reduction sent XLM’s price through the roof, appreciating nearly 30 percent in the last 30 hours.
XLM technical analysis
The sudden surge that XLM experienced took it to nearly hit the 200-day moving average on its 1-day chart. However, investors appear to have seen an opportunity to profit from the unexpected price jump. This caused Lumens to pull back to around the 150-day moving average.
Due to the high volatility, Stellar appears to be developing a spinning top candlestick pattern under this timeframe. This technical formation represents indecision about the future direction of this cryptocurrency. Neither the bulls nor the bears have been able to gain control of the price action.
It is worth noting that the preceding candlestick is a green nine per the TD sequential indicator, which is a sell signal. This, in combination with a spinning top candle, indicates that XLM could correct before continuing the uptrend. If the selling pressure behind this cryptocurrency rises, it could retrace to the $0.073 support level.
Nevertheless, a bull flag is currently forming on Lumens’ 4-hour chart. This is considered a continuation pattern that created after XLM surged to nearly $0.088, known as the flagpole, and was succeeded by the current consolidation period, known as the flag. An increase in volume could result in a breakout in the same direction of the previous trend.
By measuring the height of the flagpole, the bull flag pattern estimates a 22 percent target to the upside upon the breakout point. Such a price increase could take this cryptocurrency to trade around $0.10.
After getting rid of the inflation mechanism in XLM’s network, SDF now decided to cut in half the total supply of XLM. The crypto community seems to have welcome the decisions as it can be seen in Stellar’s market value.
With other cryptocurrencies like XRP are relatively stagnant in price, this could be the very beginning of a new trend in the industry to burn cryptos to influence prices. It remains to be seen if the decision by the SDF is significant enough to push the price of XLM even higher.
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